Bridging Finance has often been seen as an expensive form of finance, which allows property buyers to move quickly to secure properties with a short buying period.

Typically, bridging finance has been used for properties with a 1-2 month completion period. However, it has always been a premium product: as recently as a year ago, bridging finance could cost between 1-2% per month.

That situation is now changing and the cost of Bridging Finance for residential and commercial properties has been reducing rapidly with different types of loan products being created to meet gaps in the property finance marketplace.

Bridging Finance can now be secured from as little as 0.5% pcm, which is close to smaller loans from Clearing Banks, which can cost 4-5% over base. Compared with some Challenger Banks it can be a similar price or sometimes cheaper. Competition is increasing with numerous new lenders forcing existing lenders to accept lower returns.

The main difference of course is the speed of credit approval which can be 24 hours and the limited due diligence required for the loan, which is due to the bridging lender’s principal focus being the property and clear report on title, rather than the full borrower position.

New bridging or short-term loans are now available for the following purposes:

Development Site purchase, either when a site has no planning permission, has existing permission which the developer wishes to enhance or a holding period until a developer secures a contractor and confirms costs.

Development Finance where funding can be available for 75% of the site purchase and 100% of the development costs with rolled up interest.

Refinance of a completed development, to repay the development loan, which creates a new 12-18 month marketing period, that allows developers to maximise profits without a quick sale being necessary.

Buying and asset managing a vacant or low occupancy commercial property, which can include capital expenditure facilities.

Unlocking equity from an existing asset, or using an existing asset as additional security for a new purchase.

Proof of funds for new purchases for private treaty properties where there is competition from other potential buyers.

Buying properties at auction, remove the stress of trying to get your own bank to complete within six weeks when banks are now geared to a 3 month turnaround time.

Bridging Finance is evolving to fill finance gaps, moving at the speed of the property market and providing flexibility for investors and developers when they are buying, asset managing or developing properties.